The proinflammatory cytokine, tumor necrosis factor-a (TNFa), is expressed primarily in macrophages in response to bacterial products such as lipopolysaccharide (LPS). Induction of TNFa gene transcription by LPS is regulated by several transcription factors, including NF-kB. Athough TNFa plays an important protective function in animals by mediating inflammatory and immune responses, deregulated production of TNFa is associated with several serious diseases, including septic shock and rheumatoid arthritis. Therefore, it is important to determine the mechanisms that limit TNFa production during conditions of infection or injury. We have identified an activity, termed TNFa-inhibiting factor (TIF), that is secreted by macrophages in response to LPS stimulation and that negatively regulates LPS-induced transcription of the TNFa gene. Inhibition of TNFa expression by TIF is accompanied by selective induction of the p50 subunit of NF-kB as well as BCL-3, an IkappaB related protein that associates with p50 homodimers. The NF-kB p50 protein lacks transactivation domains and can inhibit transcription of certain NF-kB regulated genes. We found that overexpression of BCL-3 or p50 repressed LPS-dependent activation of the TNFa promoter and that p50 homodimers bind selectively to two sites in the TNFa promoter. These findings indicate that increased expression of NF-kB p50 and BCL-3 contributes to the repression of TNFa gene transcription. We postulate that TIF functions as a negative autocrine signal that attenuates TNFa expression in activated macrophages and that the effects of TIF are mediated, at least in part, by induction of NF-kB p50. TIF appears to be distinct from several known TNFa-inhibiting factors (IL-4, IL-10, and TGFb) and thus may represent a novel anti-inflammatory cytokine. Our current efforts involve purifying the TIF protein, cloning the TIF gene, and elucidating the signaling pathway by which TIF down-regulates TNFa gene transcription.